The Big Shift: From Estate Tax Planning to Income Tax Planning
For decades, estate planning for wealthy Americans centered on one question: how do we avoid the estate tax?
But the landscape has changed dramatically.
Recent federal tax law changes have pushed the federal estate and gift tax exemption to $15 million per person ($30 million for married couples) beginning in 2026. And this number is scheduled to increase on an inflation-adjusted basis going forward.
That means most Americans - even many wealthy ones - will never pay federal estate tax at all.
So if estate tax planning is no longer the primary issues for affluent American families, what is?
Income tax planning.
Today, the real tax risks in estate planning often come from capital gains taxes, retirement account taxation, and poor basis planning - especially for younger investors, crypto holders, and high-earning professionals.
In other words: the planning conversation has shifted from estate taxes to income taxes.
Let’s look at why.
The Death of the “Estate Tax Problem”
Historically, estate planning evolved around reducing or eliminating the federal estate tax, which can reach 40% on assets above the exemption amount.
But with the exemption now at $15 million per person, relatively few families are affected.
Even households with $5M-$10M in assets - once a classic estate tax planning demographic - may now fall well below the federal estate tax threshold.
This shift means strategies that once made sense - such as aggressive lifetime gifting or complex trust structures - may actually create new tax problems.
The biggest one?
Unnecessary capital gains taxes.
The Step-Up in Basis is Now One of the Most Valuable Tax Tools
One of the most powerful tax benefits in the U.S. tax system is the step-up in basis at death.
Here’s how it works: when someone dies, most assets reset their tax basis to fair market value. That means heirs can often sell inherited assets (including inherited assets that were previously low basis in the hands of the decedent) with little or no capital gains tax.
Example:
A parent buys stock for $100,000.
At death, the stock is worth $1,000,000.
Without a step-up in basis, heirs would pay capital gains tax on $900,000 of gain. Even if the capital asset had a long-term holding period sufficient to trigger favorable rates, the amount of tax paid would be significant.
With the step-up, however, the heirs inherit the asset with a basis of $1,000,000 - meaning zero capital gains tax is paid if the asset is sold immediately.
In an era where fewer estates face federal estate tax, losing the step-up in basis (i.e. by gifting assets during life) can be far more expensive than paying the estate tax itself (which only applies to assets remaining in the gross estate at death).
Why This Matters for Bitcoiners and Crypto Investors
Crypto investors face some of the most extreme capital gains exposure in the modern economy.
Early adopters frequently hold assets with:
Extremely low tax basis
Massive unrealized gains
Highly volatile pricing
Consider a typical scenario:
Someone bought Bitcoin in 2014 for $5,000.
Today, that position is worth $500,000.
Selling during life creates a $495,000 taxable gain. But if the asset passes through an estate, heirs may receive a full step-up in basis
This is why many sophisticated crypto investors now incorporate strategies like:
Holding assets until death
Trust structures designed to preserve basis step-ups
Charitable remainder trusts
Charitable giving of appreciated crypto
In short, crypto planning is now primarily an income tax problem, not an estate tax problem.
Millennials Are Also Sitting on Future Capital Gains Bombs
Millennials are the first generation whose wealth accumulation is heavily concentrated in taxable investments and startup equity.
Common examples include:
Index funds in brokerage accounts
RSUs and stock options
Startup founder equity
Crypto portfolios
Concentrated tech stock positions
Many of these assets also generate significant capital gains when sold.
Without planning, heirs may inherit large tax liabilities - or worse, families may accidentally destroy valuable tax attributes. This is particularly concerning for Millennials who are set to inherit long-time family residential and vacation homes with significant built-in gains.
Income-tax-aware estate planning can help optimize:
Timing of asset transfers
Harvesting or deferring gains
Preserving basis step-ups
Strategic charitable planning
The Retirement Account Tax Trap for Families
Another hidden income tax issue in modern estate planning involves retirement accounts.
Thanks to the SECURE Act, most inherited IRAs must now be withdrawn within 10 years of the original owner’s death.
This means children inheriting a large IRA may be forced to recognize significant ordinary income during their highest earning years.
Example:
A couple leaves their working, adult child a $2M IRA.
If the child must withdraw it over 10 years while earning a professional salary, much of that inheritance may be taxed at top marginal rates.
Strategies to mitigate this problem may include:
Roth conversion strategies
Charitable planning
Trust design tailored to the SECURE Act
Coordinated withdrawal planning
Once again, this is primarily an income tax issue - not an estate tax issue.
The New Estate Planning Playbook
In today’s tax environment, effective estate planning now focuses on three key questions:
1) How can we preserve the step-up in basis?
Avoiding unnecessary lifetime transfers may preserve significant tax benefits.
2) How can we minimize capital gains taxes?
Investment strategy and estate planning should be coordinated to avoid triggering large gains.
3) How can we manage income tax exposure for heirs?
This often involves careful planning around retirement accounts and appreciated assets.
For modern, digitally-native investors - these issues often matter far more than estate tax planning. And, the earlier families integrate income tax strategy into estate planning, the more wealth they preserve for future generations.
At FutureProof Law, L.L.C., we focus on tax efficiency across generations. If you want to make sure your estate plan is optimized for today’s tax environment, book your FutureProof Planning Session today or contact Jake Bruner directly by phone (303-962-0625) or email (jake@futureproof.law).
FutureProof Law, L.L.C. is a private wealth and estate planning virtual law firm focused on helping affluent Millennials, Bitcoiners, and forward-thinking families protect their privacy, portability, and sovereignty in the digital age. Founded in 2026 by Attorney Jake Bruner, FutureProof Law, L.L.C. prioritizes an underserved generation of worried clients building wealth and legacies in a modern world. Through the preparation of creative and compassionate, digitally-native estate plans, FutureProof Law, L.L.C. helps the next generation of clients in Colorado, Florida, Ohio, and Pennsylvania seize control of their lives and legacies on the cusp of the largest transfer of wealth in history. To begin planning your future, book your FutureProof Planning Session today or contact Jake Bruner directly by phone (303-962-0625) or email (jake@futureproof.law).
